Warren officials are mulling whether to provide up to $10 million in low-interest loans to help residents ravaged by last week’s damaging flood.

The City Council voted unanimously late Tuesday to direct the City Attorney’s Office to establish guidelines and procedures for such a program.

As proposed, the fund would be created by diverting the money from the city’s fund balance, which are cash reserves and, perhaps ironically, is commonly known as the “rainy day” fund.

“We have one of the largest rainy day funds of any city in Michigan,” said Councilman Keith Sadowski, who proposed the loan program idea. “We had one hell of a rainy day, and it’s time that we look at this option. We can create this flood relief program without a serious impact on the city’s financial standing.”

Advertisement

Sadowski said he does not want to put Warren or its bond rating at risk, but he pointed out that he believes the city’s financial health is strong following three separate millage increases approved by voters in recent years.

Municipal finance officials generally recommend local governments maintain a fund balance of at least 15 percent. Warren has a general fund budget of slight more than $100 million.

Sadowski said benchmarks by the Southeastern Michigan Council of Governments show the city should have a rainy day fund equal to at least 28 percent.

“We are sitting on a $45 million rainy day fund. If we can’t use it to assist residents affected by the flood then we need to start cutting residential taxes immediately,” he said.

The interest rate on the loans has not been determined but could be between 2 percent and 2.5 percent.

Mayor James Fouts says more than 18,000 homes were damaged by the Aug. 11 flooding that resulted from more than 5 inches of rain in approximately three hours that day. Some of the flooded basements had raw sewage, while some homes had storm water only.

Citywide, final damage estimates are expected to be “well over” $100 million, Fouts said this week.

The mayor declared a state of emergency the day after the torrential rain and following hundreds of phone calls from worried and desperate residents. Roseville and Center Line were among the other cities in Macomb County that had identical declarations. Those were followed by a county-wide emergency declaration issued by County Executive Mark Hackel. Later in the week, Gov. Rick Snyder issued a state of emergency for Macomb, Oakland and Wayne counties.

While visiting a hard-hit neighborhood in Warren on Monday, Snyder said state officials hope to file a formal request by the end of this week with the Federal Emergency Management Agency for federal aid to flood victims.

The Warren City Council has scheduled a meeting at 6 p.m. Monday, Aug. 25, at the Warren Community Center to continue discussing whether the city will establish the low-interest loan program and its potential details.